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Kiting is a very old scheme and is not as likely to happen as it once was, but any entity with multiple bank accounts should be aware of the possibility. For kiting to work, an individual must have complete authority over two or more bank accounts. The perpetrator must be able to sign and draw checks and must be the person reconciling the bank accounts.
The fraud starts when the perpetrator drafts a check on Bank A for a large amount (let’s say $50,000) and deposits it in Bank B. Before the funds clear, he draws a check for $50,000 on Bank B and deposits it in Bank A. The drawing of checks continues until a large float occurs. The perpetrator then siphons off a substantial balance of cash and deposits it in his own account to earn interest. The scheme can continue indefinitely as long as enough checks are drawn and deposited. The checks are never recorded on the books of the entity and the perpetrator destroys the bogus checks when they are returned with the bank statement. The best way to prevent kiting is never to give an individual the authority to sign checks and to reconcile cash. If kiting has occurred, it will be caught if the perpetrator has to take vacation for an extended period. A proof of cash will also catch kiting.
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Americans will soon start putting together the information for filing their 2009 income tax returns. Perhaps you’ve started already. Unfortunately, the requirement to file income tax returns has provided some individuals with an opportunity to defraud unsuspecting victims. These fraudsters advertise themselves as tax preparers and lure their victims with untrue promises, such as a guarantee that they will obtain large refunds for any taxpayers that use their services. They appear to keep their promises by preparing fraudulent returns that show that the taxpayers are due a refund when in fact they are not or by overstating the amount of a refund that is due. They achieve these fraudulent requests for refunds by taking phony deductions, underreporting income and claiming credits that the taxpayers are not entitled to. Sometimes they even claim credits that do not even exist.
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Our friends at EagleBank, a local community business bank with fourteen offices in Maryland, Virginia and Washington, DC, are reminding their customers of the importance of keeping up-to-date with internet and e-mail best practices in order to decrease the chance of fraudulent activity. They have provided the following list of recommendations for those who utilize ACH and wire transfers:
1. Provide the bank with a dollar limit for all individual ACH and wire transfer transactions.
2. Provide the bank with a daily dollar limit for the business for all ACH and wire transfer transactions.
3. Require a second approval for all ACH and wire transfer transactions.
4. Set-up pre-filled ACH and wire templates for common transactions.
5. Require a second token number be entered to send an ACH or wire transfer transaction.
6. Have a dedicated online banking PC that is not used for any email or other internet activity.
7. Monitor your account throughout the day.
For additional information on fraud prevention, you can visit the EagleBank home page at www.eaglebankcorp.com and click on “Phishing Attacks & ID Theft” on the sidebar.
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Forensic Accounting Firm
Offices in Bethesda, Maryland/Washington DC and Alexandria Virginia
presented by Bond Beebe, forensic accountants
Hello everyone, and welcome to the Forensic Accounting Blog sponsored by Bond Beebe, a Washington, DC based forensic accounting firm of certified public accountants and certified fraud examiners, with offices in Maryland and Virginia We have started this blog to provide a forum to talk about fraud, forensic accounting, forensic investigations, litigation support and their many related issues. As a firm of certified public accountants, we at Bond Beebe constantly deal with the possibility of fraud, whether performing services as auditors, tax specialists or management advisors. And, as forensic accountants, investigators, and advisors, we strive to assist our clients in the detection and prevention of fraud. So, we have set up this site to express our views and pass along information that we hope will be of interest to readers and participants. For more information on forensic accounting, please click here: Forensic Accounting
Certified fraud examiners and forensic accountants in Washington, D.C.
Although Bond Beebe will sponsor this site and the
Certified Fraud Examiners in our firm will be frequent contributors, it is our hope that many of you who are interested in fraud and forensic investigations will feel free to participate with your comments. Also, it is our intent to feature articles by Guest Bloggers from time to time to allow multiple points of view from information technology specialists, attorneys, college professors and other professionals who have devoted their careers to this topic. So, again, we welcome you and look forward to your comments.
